Turkish Central Bank Announces Interest Rate Hike
Changes in the Interest Rate
In a surprising move, the Turkish Central Bank announced on Thursday a hike in the interest rate by 250 basis points, bringing it to 45 percent. This decision was made during the first meeting of the Monetary Policy Committee of the Central Bank for the year 2024.
Impact on Inflation on Turkey
According to the statement issued by the bank, the core inflation in December 2023 rose in line with expectations. Short-term indicators suggest that monetary tightening has positively impacted financial conditions and contributed to achieving balance in domestic demand.
Impact on the Turkish Economy
The statement also confirmed that the improvement in external financing conditions, the continuous increase in reserves, support for the current account demand balance, and the increase in domestic and foreign demand for Turkish lira assets, all contribute strongly to the stability of the exchange rate and the effectiveness of monetary policy.
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Future Steps
The statement indicated that the level of monetary tightening necessary to curb inflation has been reached and will be maintained as long as necessary. The statement added that “in case significant and sustainable risks appear on inflation expectations, monetary tightening will be reviewed.”
Background
Last month, the Central Bank raised the interest rate by 250 basis points, to 42.5 percent, on repurchase “repo” operations for a week. This latest move reflects the bank’s ongoing policy of raising interest rates to maintain economic stability.
For more information on the Central Bank's decision, you can click [here]
